Even though the global oil price had dropped dramatically, governments have understandably been reluctant to reinstate the subsidies that they painfully removed in 2008. As a result, diesel costs in many Asian countries remain much higher than they have traditionally been - exerting inflationary pressure on product prices across all industry sectors.

Proactive businesses can use this as an opportunity to differentiate themselves and to derive competitive advantage.  Imagine what it will do for your business if you able to deliver an improved service, keeping transport costs prices down while your competitors are raising theirs.

Traditional isn’t best

Many managers we talk with are stuck in the mindset that low cost transport has to be ‘old and dirty’ relying on worn out vehicles with live-in crews.  This may have been true once, but we’ve proved that, with every fuel price hike, the competitiveness of well managed modern vehicles increases.

In a recent example, we achieved a 25% transport rate reduction while delivering a more reliable, safer and environmentally friendly service.

Stepping out of the box

Smart businesses can avoid much of the pain of fuel price rises while using them to achieve a competitive advantage.

You can do this by taking a number of steps that offer very rapid payback.  They help you stay on top of transport costs, while simultaneously driving a better service.

Five simple steps

1. Understand your transport provider’s costs

   If you don’t, how do you know that you are paying a fair price?  How do you know what proportion of his costs are in fuel and lubricants, an thus what rate increase is justified.

2. Ensure that your transport operation is being well managed

   Do you have the right fleet mix to meet your needs? Are you operating the right type of vehicles?  Are you planning your delivery routes efficiently?  Are you maximizing vehicle utilization? Do you make more trips than required?  Is the fleet maintained properly - tyre and parts usage being properly controlled?  Are the drivers practicing fuel saving techniques?

3. Don’t add unnecessary costs

   Are you sure that you are not forcing your provider to incur costs that you eventually end up paying for?  In our experience, the traditional ‘fixed-rate’ relationship does not encourage constructive discussion of such issues.

4. Look for collaboration

   There are a lot of other companies out there - suffering through high transport costs.  These could be your suppliers, customers or complete strangers.  Are there opportunities for you to benefit through cooperating that another company to fill vehicles or achieve effective backhauls?

5. Ensure that you optimize your distribution network

   Distribution networks usually develop over decades.  The problem is that companies rarely step back and assess whether they are now working for or against them.  Ask this question!  It is now possible to rapidly construct models that will clearly demonstrate where sub-optimization exists, how to correct it, and how to stay efficient

Getting help

LCA can and does help companies across Asia with each of the above.  ROI on these projects is usually very high - payback often being achieved within months.

If you would like to know more, please contact us.